USDCAD Technical Analysis – Time for a bigger correction?


  • The Fed hiked by 25 bps as
    expected and kept everything unchanged.
  • Fed Chair Powell reaffirmed their data dependency
    and kept all the options on the table.
  • The US economic data keeps on surprising to the
    upside, but inflation expectations and CPI readings continue to show
    disinflation with the last two Core CPI M/M figures
    coming in at 0.16%.
  • The US PMIs missed
    expectations across the board last week, while the US Jobless Claims remained
  • Fed Chair Powell’s speech at the Jackson Hole Symposium was
    mostly in line with what he said previously but he stressed on the need to be
    careful going forward and that continued strength in the labour market may
    require further rate hikes.
  • At the moment, the market doesn’t expect another
    hike from the Fed, but the next NFP and CPI data will be crucial to confirm or
    change this view.


  • The BoC hiked rates by 25 bps as expected at the last meeting as
    the central bank doesn’t like the persistently high underlying inflation with a
    tight labour market.
  • In the recently released Meeting Minutes the BoC seems less in a rush to
    hike rates again.
  • The Canadian underlying inflation
    data beat expectations on all measures for the June readings and last week we
    got another beat for the July data.
  • On the labour market side, the last
    report showed that the unemployment rate increased once again, but the average hourly earnings surprised to the upside as well.
  • The Canadian Core Retail Sales missed expectations.
  • Overall, it’s a mixed picture for
    the BoC.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that USDCAD keeps on
rallying with almost no pullbacks. The bullish momentum has been relentless,
and the pair broke out of many key resistance levels.
The next resistance comes at 1.3664 and a break above it would open the door
for the 1.3862 level.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the pair has
been diverging with the
MACD for a
long time. This is generally a sign of weakening momentum often followed by
pullbacks or reversals. In this case, we only got the pullbacks, and we can see
that we have a strong upward trendline where we
can expect the price to bounce off of next.

In fact, we have a good support level at the
trendline as there’s also the confluence with the
previous resistance now turned support and the
61.8% Fibonacci retracement level.
This is where we can expect the buyers to pile in with a defined risk below the
trendline to target a new high. The sellers, on the other hand, will want to
see the price breaking below the trendline to confirm a reversal and position
for a deeper correction into the 1.34 handle.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have an interesting zone around the 1.36 handle where the price has been
struggling to break through except the upward spike during the Fed Chair
Powell’s speech at the Jackson Hole Symposium. Therefore, if we see the price
breaking above the level, we can expect the buyers to push the pair into the
1.3664 resistance.

Upcoming Events

This week is an important one given that we will see
many key labour market data for the US, including the NFP, before the next FOMC
meeting. Today, we have the US Consumer Confidence and the US Job Openings
reports. Tomorrow, we have the US ADP report. Moving on to Thursday, we will
see the US Jobless Claims and the US PCE data. Finally, we conclude the week
with the US NFP and the ISM Manufacturing PMI on Friday. Although the Fed keeps
all the options on the table, it’s also leaning more towards a pause in September,
so we will need strong data to make the market to expect a hike at the upcoming

This article was written by FL Contributors at Source